(1) This Letters Patent Appeal is from the decision of Hegde. J. who has granted leave to appeal under clause 15 of the Letters Patent on the ground that there is conflict of judicial opinion on the following question that arises in the appeal:
Where a compromises decree passed by a Court of competent jurisdiction contains a term which is opposed to law or public policy, and that decree has not been set aside in proper proceedings, can that decree be pleaded as constituting estoppel by res judicata in a subsequent proceeding between the same parties.
(2) The facts of the case have been fully set out in the judgment of the learned Judge and it is sufficient to state them briefly here. Land bearing S. No. 188 in Dyaberi village belonged to the plaintiff's uncle, Piraji, who had mortgaged the whole of that land. Subsequently he sold a portion of it bearing S. No. 188/2, to the plaintiff for Rs. 700/- under Exhibit 60 dated 12-9-1939. As Piraji failed to pay the mortgage debt in accordance with the directions of the decree in C. S. No. 133 of 1938 between him and the mortgagee, the Court transferred the decree to the Collector for sale of the mortgaged property.
(3) During the pendency of the Darkhast before the Collector, Piraji sold other portions of S. No. 188 to two other persons through one of whom the plaintiff purchased a portion bearing S. No. 188/1B. The plaintiff sold the suit property (S. No. 188/2) to the defendant under Exhibit 59 dated 11-7-1941.
(4) Piraji instituted a suit--C. S. No. 1017 of 1945, against the present plaintiff and the present defendant and other alienees of different portions of S. No. 188, for a declaration that the alienations effected by him during the pendency of the Darkhast before the Collector, were illegal and void ab initio, as being in contravention of the provisions contained in para 11 of Schedule III of C. P. C. That suit ended in a compromise and Piraji was paid a sum of Rs. 700/- by the present plaintiff and a sum of Rs. 300/- by the present defendant. The compromise decree was made by the Court on 12-9-1945 (Exhibit 62) and the relevant portion of it reads:
'In order that there should not be any dispute between the parties with respect to the land, defendant No. 2 has paid Rs. 300 to the plaintiff Piraji out of Court. Therefore defendant No.2 should make Wahivat of S. No. 188/2 as an absolute owner. To that either the plaintiff or the defendants Nos. 1 and 2 should not raise dispute of any nature.'
(The present plaintiff was defendant No. 1 and the present defendant was defendant No. 2 in that suit.)
(5) The plaintiff brought the present suit for a declaration that the sale of the suit land by him in favour of the defendant on 11-7-1941 was void ab initio and for possession of the suit land.
(6) The principal defence of the defendant was that the present suit was barred by principles of res judicata by reason of the compromise decree in C. S. No. 1017 of 1945. But the plaintiff pleaded that the compromise decree was a nullity and had not effect as it sought to validate an illegal transaction offending para 11 of Schedule III C. P. C. The plaintiff attempted to get rid of the compromise decree not on the ground that the compromise was opposed to law but on the ground that his consent was obtained by fraud and undue influence. He failed in that attempt in the Courts below and gave up that attempt in the second appeal.
(7) Hegde, J. held that when a Court puts its seal of approval to a compromise arrived between the parties, then it ceases to be contract simpliciter and becomes binding on the parties to it until it is set aside in an appropriate proceeding. The correctness of this view has been questioned in the present appeal before us.
(8) As stated by the Supreme Court in Shankar Sitaram v. Balakrishna Sitaram, : 1SCR99 it is well settled that a consent decree is as binding up on the parties thereto as a decree passed by invitum. The following observations of Lord Herschell in In re: South American & Mexican Co; Ex parte Bank of England, (1895) 1 Ch. D. 37 at p. 50 were quoted with approval by the Supreme Court in Sailendra Narayan v. State of Orissa, : 1SCR72 :
'The truth is, a judgment by consent is intended to put a stop to litigation between the parties as much as is a judgment which results from the decision of the Court after the matter has been fought out to the end.'
(8A) The distinction between an ordinary agreement and a decree based on such agreement was explained thus as early as in 1897 by Byrne, J. in Wilding v. Sanderson (1897) 2 Ch. 534:
'A consent judgment or order is meant to be the formal result and expression of an agreement already arrived at between the parties to proceedings embodied in an order of the court. The fact of its being so expressed puts the parties in a different position from the position of those who have simply entered into an ordinary agreement. It is of course, enforceable while it stands, and a party affected by it cannot, if he conceives he is entitled to relief from its operation, simply wait until it is sought to be enforced against him, and then raise by way of defence the matters in respect of which he desires to be relieved. He must, when once it has been completed, obey it, unless and until he can get it set aside in proceedings duly constituted for that purpose.......'
(9) We shall advert to the two decisions of the Bombay High Court referred to in the decision under appeal. In Basangouda v. Basalingappa, AIR 1936 Bom 301, following the earlier decisions of that Court and the decision of the Privy Council in G. N. W. C. Ry. v. Charlebois, 1899 A. C. 114, Broomfield, J. who spoke for the Bench said:
'.... The argument on plaintiff's behalf here, as in the lower court, is that the compromise amounted to an alienation to persons who were not watandars, and was therefore contrary to section 5, Watan Act, and unlawful. Let us assume for the moment that was so. That would be a good ground for setting the decree aside but it would not render the decree a nullity or get rid of the necessity of getting it set aside in due course of law and within the period of limitation....''.
(10) In Govind Waman v. Murlidhar, : AIR1953Bom412 Gajendragadkar, J. (as he then was) emphasised the distinction between a contract and a consent decree and rejected the contention that a compromise decree is a nullity merely because it contains a term opposed to law or public policy. This is what his Lordship said at pp. 416 and 417:
'We think that a consent decree passed by a court of competent jurisdiction cannot be treated on the same footing as a contract between the parties. It is true that before a Court passes a consent decree, it can and should examine the lawfulness and validity of the terms of the proposed compromise. But once that stage is passed and a decree follows, different considerations arise. Indeed, Mr. Murdeshwar has not cited before us any decision of this Court which actually decided that a compromise decree which contains a term contrary to law is for that reason a nullity. On the contrary, as we have just point out, a large number of reported judgments of this Court have taken a contrary view. Therefore, in our opinion, the lower appellate Court was right in coming to the conclusion that despite that fact that one of the terms of the compromise decree is opposed to the provisions of section 10 T. P. Act, the decree is still binding between the parties and cannot be said to be a nullity. If it is not a nullity, its terms must be enforced and the plaintiff would be entitled to claim possession of the property.'
(11) We shall now examine the decisions that have taken the contrary view. In Lakshmanaswamy Naidu v. Rangamma, (1903) ILR 26 Mad 31, the question that arose for decision was whether the executing Court can entertain objections as to the validity of a compromise decree on the ground that one of the terms of the decree the judgment-debtor (defendant) agreed that his office in a certain temple and his right to emoluments of the office which had been mortgaged should be sold in satisfaction of the mortgage debt. A Bench of the Madras High Court said:
'Under Section 375 of the Civil Procedure Code the Court has no jurisdiction to pass a decree on compromise unless it was a 'lawful' compromise.
Any terms of a contract which are opposed to public policy are invalid and will not be enforced by the Courts. So far as the decree embodied unlawful terms of compromise it is inoperative and will not be enforced.'
(12) This view was followed in a subsequent decision of the Madras High Court Ramachandra v. Venkatalakshminarayana AIR 1919 Mad 429. There, an impartible estate was mortgaged and the suit filed by the mortgagee was compromised. Under the terms of the compromise the mortgagor was given certain installments and in case of default in payment of those installments the mortgaged property would be sold. There was a default in paying the amount of the compromise decree. An application was made for a final decree and for sale of mortgaged property. Defendants raised objection that the estate was impartible and inalienable and could not be sold in pursuance of the compromise decree. Abdur Rahim. J. who spoke for the Bench said:
'It is difficult to see how it (the compromise decree) estops him (the defendant) from asking for an enquiry on this issue. It is well known that there is no estoppel against a statute. It is the duty of the Court to give effect to the statute in spite of the conduct of the parties'.
(13) A number of decisions of the Madras High Court have taken the same view even in respect of decree other than compromise decrees when there is an express prohibition by a statute against the sale of any property in execution of a decree.
(14) These decisions of the Madras High Court were reviewed by a Full Bench of the Andhra Pradesh High Court in Venkataseshayya v. Virayya Air 1958 Andh Pra 1. One of the two questions referred to the Full Bench was as follows.
'Whether, when service inam lands have been sold in execution of a mortgage decree without any objection being raised at any stage of the proceedings to their sale ability by reason of the prohibition contained in section 5 of Madras Act III of 1895, it is open to the inamdar to treat the court sale as null and void and recover possession of the lands from the purchaser at a court sale or resist the claim of the purchaser to be put in possession of the lands?'
(15) This is what Subba Rao, C. J. (as he then was) who delivered the opinion of the Full Bench, said:
'The rule of res judicata embodied in section 11 does not exempt from its operation issues raising questions of public policy depending upon either common law or statutory prohibitions. It has also been held that section 11 is not exhaustive and that the principle of res judicata could be applied to interlocutory orders and to execution proceedings..... If the appellants who could have non-suited the plaintiff by raising the question of the inalienability of the carpenter service inam, did not raise it, by reason of that Explanation, (Explanation IV to S. 11) the said question must be deemed to have been constructively in issue n the suit. When a decree was made, the court must be deemed to have decided that the said property was alienable property and, therefore, the same decree would operate as res judicata in a subsequent suit.......... There is no conflict between the principle of res judicata and that of prohibited alienation of particular properties on the ground of public policy. An alienation of properties prohibited by public policy or statue may be void. But the said prohibition cannot have the effect of depriving the jurisdictions of courts to decide in a particular suit whether the alienation is void or not. Nor can it override the principles of res judicata. The former belongs to the domain of substantive law and the latter to the rule giving finality to decrees of competent Courts. The sanctity of final judgments is as much based on public policy as prohibition against the alienations of properties annexed to certain public officers........................ The validity of the mortgage on the ground of public policy was not raised in the earlier suit or in execution proceedings, and therefore, the decree and the order confirming sale would operate as res judicata in the present suit.
(16) In Baldeo Jha v. Ganga Prasad, : AIR1959Pat17 the question arose whether a compromise decree in a previous suit agreeing to divide the amount of pension in certain proportion between the parties, will operate as res judicata in a subsequent suit between the same parties A Bench consisting of Ramaswamy, C. J., and R. K. Chowdhary, J., said:
'It is settled principle of law that a contract is not less a contract and subject to incidents of a contract because there is superadded the command of the Judge. If, therefore, the object or consideration of the compromise on which the decree is based comes within any of the matters enumerated in that section as making an agreement unlawful, the compromise decree itself is unlawful and is thus void.'
(17) Their Lordships held that the compromise decree in that case which permitted a traffic in pension, could be ignored as being void ab initio in any proceeding either in the same suit or in a subsequent suit.
(18) But in Baijnath Prasad v. Ramphal, : AIR1962Pat72 (FB) the majority of a Full Bench took the view similar to that of the Full Bench of Andhra Pradesh in AIR 1958 Andh Pra 1.
(19) In G. V. Bhatta v. N. P. Hegde (1965) 1 LR 8 decided by one of us, this Court preferred the view taken by the Full Bench of Andhra Pradesh High Court in Air 1958 Andh Pra 1 and by the majority in the Full Bench of Patna High Court in : AIR1962Pat72 , to the view taken by the Madras High Court in (1903) ILR 26 Mad 31.
(20) With all respect to the learned Judges of Madras High Court and to the learned judges of Patna High Court who decided Baldeo Jha's case, : AIR1959Pat17 we think the view taken by the Bombay High Court is a better view. As stated by Gajendragadkar, J. (as he then was) though the Court should examine lawfulness and validity of the terms of the proposed compromise, once that stage is passed and the Court has put its seal of approval to a compromise and made it a decree of the Court, then that decree is binding between the parties and must be enforced, unless it is set aside in a proper proceeding. As pointed out by Hegde, J. in his decision under appeal, finality of decision is an important principle of law based on public policy. If a compromise decree of competent Court, which has not been set aside, can be ignored on the ground of it embodying an illegal term, there will be confusion and uncertainty.
(21) In Gulabchand v. Chattarsingh, : AIR1960MP141 , considering the question whether a minor after attaining majority, can bring a suit ignoring the compromise arrived at in a suit to which such minor was partly without obtaining the leave of the Court, Khan, J. said:
'........ The reason why in the circumstances it is necessary for the minor to bring the suit to avoid a decree is that if he did not do so, the position will be that there would be one decree against him, based on the compromise and there will be another decree regarding the same subject matter, perhaps in his favour. Both decrees would be executable and this conflict of judicial decision would make confusion worse confounded.'
(22) Similar consequences will follow if an earlier compromise decree can be ignored as being illegal.
(23) We agree with the view taken by the learned Judge (Hegde, J.), in the Second Appeal and we dismiss this appeal with costs.
(24) Appeal dismissed